NEW YORK--A federal judge indicated at a hearing on Friday she will approve a proposed class-action settlement under which Merrill Lynch will pay roughly $21 million to former brokers who claim they were wrongly denied deferred compensation, according to lawyers involved in the case.

U.S. District Judge Alison Nathan still must sign an order officially approving the settlement, according to a lawyer. Once that happens, the process for distributing the funds consistent with the settlement will kick in.